April 16, 2013

IER Senior Fellow Targets Wasteful Wind Subsidies

April 16, 2013

WASHINGTON D.C. — IER Senior Fellow Robert Michaels will testify at 2:00PM today before a joint hearing of the House Science Subcommittees on Energy and Oversight. Michaels’s testimony will focus on the inefficiency and ineffectiveness of wind energy subsidies. The text of his introductory remarks, as prepared for delivery, follow:

Thank you for the invitation to testify on subsidies to wind power. Today’s hearing provides a valuable opportunity to re-evaluate the inefficiency and ineffectiveness of those subsidies. It is being held in a continuing environment of fiscal stress, but also in an emerging renaissance of affordable, secure and clean, domestically-produced energy.

GAO’s report identifies more than eighty fragmented and sometimes duplicative programs to assist wind energy, itself a technology with over 100 years of experience and 20-plus years of federal support. For all of these resources, both governmental and corporate, wind energy remains far from cost-competitive with conventional, controllable power sources.

Unlike dispatchable sources, wind turbines cannot increase production when power demand is high, and their intermittency imposes costs on other generators and consumers. These costs include additional transmission, environmental impacts and distortions of competitive energy markets.

My testimony touches on both the operational problems of wind energy itself, and the aggravation of these problems that results from government support and state requirements such as renewable energy quotas.

First, no amount of federal support can make the wind blow. In most regions the wind is strongest at night when power demand is lowest, and weakest during afternoon peaks. Further, it contributes to reliability problems because the amount of power produced in an area must equal the amount users wish to consume every second. A momentary mismatch will black out the region, and stored power (except for hydroelectric dams) is too costly to alleviate the situation.

Second, because our abilities to forecast wind are still weak, system planners and operators cannot count on it as a dependable, (“firm”) resource. Texas’ grid operator, the Electricity Reliability Council of Texas (ERCOT) counts a megawatt of wind generation capacity as equal to only one-twelfth of a megawatt of dependable capacity. Wind’s full costs include those of accessing isolated plants. Of ERCOT’s planned $8.7 billion in new high-voltage lines, over $5 billion will reach wind units that produce only about 30 percent of the time. But looking only at generation cost, the Energy Information Administration forecasts that in 2018 an advanced gas-fired plant will have a 24 percent lower cost per megawatt-hour than an onshore wind unit. Note that this is inclusive of its fuel cost.

Third, an environmental case for wind may look easy because no fuel is burned in producing it. In reality intermittency raises costs because it forces the use of costly fossil-fuel backups, whose costs also include those associated with pollutants and pollution controls. If gas-fired backup capacity is limited, as has occurred in Texas and Colorado, there are few alternatives to additional operation of coal-burning generators.

Fourth, wind’s value depends the values of other energies. Federal programs like those noted by GAO Report could (but need not necessarily) impact future technologies. But even if they advance wind, the value they might create is already falling. There is growing agreement that America’s energy future is definitively changing for the better as advances in natural gas proliferate, increasing its affordability and our security. Today the fears of hydrocarbon scarcity that once informed wind energy subsidies are rapidly receding memories. New supply technologies are being matched by advances in consumer responsiveness to prices that accurately indicate scarcity. In practice, wind randomizes and distorts these prices, increasing the risks of incorrect responses to changing market conditions.

Finally, wind power’s actual and hidden costs matter for the many American families who have seen five years of hardship. These costs sooner or later turn up in their power bills, if not in their taxes, and they are costs without benefits for them. A tax (which this is) that consumers must pay to buy something of low value harms them, while creating benefits for those whose influence helped it become law. Our case in point is the latest one-year extension of the PTC, scored as a $12 billion increase in costs by the Joint Committee on Taxation.

Nor can wind bring prosperity by bringing “green jobs,” which have little basis in logic and no visibility in practice. As I show in earlier testimony (attached to today’s) the National Renewable Energy Laboratory’s technique for estimating them is devoid of value, because its only possible result, regardless of the numbers, is job creation. The question is not green jobs, but good jobs. For good jobs, America needs abundant energy.